Government publishes the new ADR Regulations

The UK Parliament has published the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (the “Regulations”) which implements the measures in Directive 2013/11/EU.

In summary, these Regulations are intended to promote ADR as a means of redress for consumers in relation to unsatisfactory goods or services, particularly for online sales where the consumer and trader are resident in the EU.

Under the Regulations, certain Competent Authorities will be responsible for monitoring entities who offer ADR to ensure that they comply with the specified standards, set out in the Schedule. These Competent Authorities must keep an up-to-date list of ADR entities. These requirements will come into force on 7 April 2015.

More compulsory pre sale disclosures

However, of greater impact to UK based marketers, is the fact that the Regulations impose obligations on traders to provide certain information to consumers on ADR.

Under Regulation 19(1), where a trader is required to use ADR services:

under an enactment; or

due to the rules of a trade association, then the name and address of the ADR entity must be available on the trader’s website and in the general terms and conditions between the trader and consumer.

In addition, Regulation 19(2) stipulates that, where a consumer has exhausted an internal complaints handling system in relation to a dispute relating to the sales or service contract, the trader must, on a durable medium:

inform the consumer that the trader cannot settle the dispute with the consumer;

provide the consumer with the name and address of a competent ADR entity, should the consumer want to use ADR; and

tell the consumer whether the trader is obliged, or prepared, to submit to an ADR process with that entity.

The obligations in relation to traders supplying ADR information come into force on 9 July 2015.

Why this matters:

These changes place an increased obligation on traders, especially e-commerce entities, to inform consumers of the relevant ADR mechanics. They are likely to greatly increase the number of disputes referred to ADR. Businesses and traders with mandatory ADR referral schemes will have to advise consumers that a dispute can be referred to the relevant ADR body and those in sectors where the use of ADR is voluntary will have to advise consumers whether or not they will comply with the ADR process.

Interestingly, the BIS Consultation on this issue, published in November 2014, states that most respondents feel that businesses would sign up to a voluntary ADR scheme. It will invariably lead to an increase in ADR, although it should be noted that these provisions only relate to business-to-consumer contracts and not to business-to-business contracts.

Businesses should start to consider the impact on their relationship with consumers and set up a process for informing consumers of the ADR options available to them. In addition, as discussed above, certain entities which are subject to mandatory ADR will have to amend their terms and conditions and websites to comply with these Regulations by 9 July 2015.